Luxury electric car maker Tesla recently ran into legal problems. Interestingly, this legal trouble has nothing to the with the cars themselves. Rather, it has to do with the way that Tesla sells its cars. Tesla has the audacity to sell its cars directly to customers and cut out the middle man; this is the kind of dangerous nonsense that won’t fly in many states. Tesla has been effectively banned from selling cars in New Jersey, Texas, and Arizona because they are allegedly in violation of laws that require the automobiles to be sold through dealer franchise. Not surprisingly, the move has many consumers asking why these laws exist and whether they are valid. The answer to the first question is easy – $$$ and lobbyists. Automobile dealers have, through lobbyists, thrown around a lot of money to local politicians to ensure that protectionist laws are passed to ensure their continued viability. Those politicians then pass laws requiring that cars can only be sold through licensed dealers under the guise of safety. It’s akin to paying protection money to the mob.
The more interesting question is: Are these types of laws valid? The question is not as easy to answer as it once was. Under the doctrine known as the “rational basis review,” the Supreme Court has held that just about any law that didn’t discriminate against a protected group like minorities or women was presumed to be valid. The judiciary was not supposed to be second-guessing legislatures on whether a law had a legitimate public purpose. However, recently, courts have been looking at these types of laws more closely. The Fifth and Sixth Circuits recently struck down state laws that restrict who can sell caskets. The courts found the problems with these particular laws was that they only protected funeral directors against competition and didn’t have the sort of health and safety justification that could overcome scrutiny.
The multi-million dollar question for Tesla is whether these automobile dealer franchise laws have the sort of safety justification necessary to survive judicial review. Tesla’s CEO, Elon Musk, certainly doesn’t think they do. He recently stated:
The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures “consumer protection”. If you believe this, Gov. Christie has a bridge closure he wants to sell you! Unless they are referring to the mafia version of “protection”, this is obviously untrue. As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind.
These statements certainly ring true for for me. It’s certainly not a fun process, and there is virtually no sense that the dealer is looking out for you. I’d much rather buy a car directly from Honda than from a dealer.
Don’t you just hate it when a live fish eating contest at a haunted house goes awry after you’ve PAID your $15 to enter the contest? Apparently, so does a Tennessee man named Cameron Roth. He has filed a lawsuit against the operators of a Tennessee haunted house alleging that he was hospitalized for four days when he choked on a live fish he ate during one of their contests. The facts are these: Mr. Roth paid $15 to Frightmare Manor in 2013 to compete in a contest at the Haunted House. The contest involved eating two live bluegill fish. The suit alleges that “Frightmare failed to remove any of the spines from the bluegill fish” before providing them to contestants. That would be an interesting feat to remove the spines from fish in a live fish eating contest. But we digress. Mr. Roth began choking as the first fish became lodged in his throat. For those who are curious, this is how big a bluegill fish is:
The lawsuit alleges that Frightmare negligently failed to have any medical workers on hand to supervise the contest and workers did not seek emergency medical help when Roth began choking. The suit seeks $150,000 in compensatory damages and $400,000 in punitive damages. If the fish was anywhere close to as big as the one pictured above, this would appear to be a case of assumption of risk.
There has been a lot of press in the past year about the various government programs in place for the United States to snoop on its own citizens. Well, apparently, all that snooping is far from free, and the federal government is none too happy with one of its bills. Federal officials filed a lawsuit earlier this week alleging that Sprint Communications overbilled the FBI, U.S. Bureau of Alcohol, Tobacco and Firearms, and other government to the tune of $21 million for wiretap services. Communication companies ordered by courts to intercept customers’ communications are allowed to recoup the cost of installing and maintaining the wiretaps. However, the federal government and communications battled for years over who covers the cost to upgrade their equipment and facilities to ensure they can comply with court orders seeking wiretaps of their customers. In 2006, the Federal Communications Commission settled the dispute in favor of the government, ruling that companies can’t bill for modifying their equipment and facilities to more efficiently intercept communications. Shocking! The lawsuit filed in federal court in San Francisco alleges that Sprint fraudulently billed for such expenses relating to equipment and facilities, which it knew was not billable. The tab from 2007 to 2010 amounted to $21 mil. Of course, like any good Plaintiffs, the government doesn’t just want its $21 million back from the over-billing. The feds are seeking treble damages, which would amount to approximately $63 million. Sprint has denied any wrongdoing. This whole thing just seems silly. Maybe Sprint should just suggest that the federal government join up with Russia for a wiretapping Framily Plan. That might save Uncle Sam a little money. Because “You don’t have to be family, to be Framily.”
One of Apple’s big selling points has long been that their products “just work.” Most Apple users would likely confirm that the claim is true, at least for the most part. However, one group of Apple customers was apparently not so satisfied with Apple’s voice recognition software, known as Siri, and filed a consumer protection lawsuit in 2012. That lawsuit (In Re iPhone 4S Consumer Litigation, 12-cv-1127, U.S. District Court, Northern District of California (San Francisco)) was recently dismissed. The plaintiffs claimed that Siri didn’t work as advertised. Specifically, they alleged that sometimes Siri didn’t understand their requests, required long wait times, or responded with the wrong answer. Apple didn’t exactly put up a strong defense of Siri’s functionality by arguing that the plaintiffs could have simply returned their phones if they were dissatisfied. Even assuming the complaints about Siri are true, does that mean the plaintiff’s are entitled to recover? Not even close.
In February, U.S. District Court Judge Claudia Wilken dismissed the plaintiff’s claims, calling them ”non-actionable puffery” and ruling that the plaintiffs had failed to show adequate evidence of any fraud in Apple’s part. She also noted that Apple made no promise that Siri would operate without fail and that a reasonable consumer would understand that the commercials depicting the products they are intended to promote would be unlikely to depict failed attempts.
Thankfully, the judge used common sense in this case, which will hopefully help avoid a line of case law requiring advertisements to depict dropped calls, broken down cars, malfunctioning computers, et cetera.
We reached out to Siri for a comment and she replied:
I’m really sorry, but I can’t take any requests right now. Please try again in a little while.
(Editor’s Note: Since we’re talking about Siri, please feel feel to revisit our April 2012 post entitled “Deposing Siri.”).
The Canadian Olympic Committee (COC) is none too happy about The North Face’s design and marketing choices for some recently released apparel, which it believes is an attempt to mislead people into thinking the company is an official sponsor of the 2014 Winter Olympic Games. The COC has filed suit in a Canadian Court alleging that the apparel and the marketing surrounding it violate numerous Olympic trademarks. The dispute is over The North Face’s clothing line originally dubbed its “2014 Village Wear Collection,” which used the marks “RU/14,” and “2.7.14″ (the date of the open ceremonies). The designs also prominently feature national flags and the items were allegedly identified in marketing materials with names such as “Men’s Sochi Full Zip Hoodie.” Here is an example of one of the items from the collection. The COC claims that the words, images, and symbols were used by The North Face in a way that was “deliberately designed and calculated to mislead and confuse the public into believing [The North Face] is an official sponsor [of the 2014 Winter Olympics]. The North Face has renamed the line the “International Collection” in response to complaints by the COC but apparently has not changed any of the designs and has refused to stop selling the products. The COC is seeking damages in an unspecified amount, as well as an injunction prohibiting the further sale of the products.
The North Face has released a statement on the matter denying liability. The director of brand communications said in the statement:
The North Face has been a longstanding supporter of the free-skiing movement but we are not an official sponsor of the Canadian Olympic Committee or Team Canada and never indicated that we were. We do not agree with the COC’s claims and are disappointed that they have taken this action.”
This whole lawsuit is not that surprising given that the Olympics have become all about big big money in the past decades and the International Olympic Committee is fiercely protective of its brand. The Olympic brand has a lot of value associated with it and companies spend oodles of money to become official Olympic sponsors. Although all of the individual actions of The North Face may have been okay on their own, they may actually be in trouble when you look at the apparel and marketing campaign as a whole. Perhaps most troubling for The North Face is the fact that it allegedly had a product catalog that stated the product line “captures the international spirit of the Olympic Games.”
Carnival Cruise Lines recently scored a big legal victory in the South Carolina Supreme Court against several Charleston preservation and environmental groups. The Plaintiffs claim that a 2,000 passenger Carnival cruise ship that uses Charleston as its home port is a nuisance. The Court found that the Plaintiffs lacked standing because they were alleging a general public nuisance.
The Plaintiffs in this case alleged that the mammoth cruise ship caused traffic congestion while loading and unloading its 2,000 passengers in downtown Charleston. They also claimed that it created air pollution and blocked views. Anyone who has been to downtown Charleston on a day when the cruise ship was loading up can certainly confirm its effect on traffic. The several story high ship also blocks some views of the river. However, the court never reached the underlying nuisance claim. Instead, the Court disposed of the case by holding that the Plaintiffs lacked standing because they were alleging a general public nuisance. In South Carolina, as in most states, no civil remedy exists for a private citizen harmed by a public nuisance, even if his or her harm was greater than the harm suffered by others. Rather, a plaintiff must allege a particularized harm to his or her legally protected interest.
As reported by Reuters, one of the lawyers for the Plaintiffs, Blan Holman, has said that some individual property owners are considering refiling the lawsuit as individuals. Presumably, those property owners will attempt to allege a private nuisance for show that the cruise ship specifically interferes with the enjoyment and use of their property.
The case is Carnival Corp., et. al. v. Historic Ansborough Neighborhood Ass’n, No. 2011-197486 (S.C. Nov. 19, 2013).
Not too long ago, the federal government proposed eliminating restrictions on the use of corn and soybean seeds that are genetically engineered to resist a weed killer known as known as 2,4-D. These seeds, developed by Dow AgroSciences, purport to allow farmers to use this powerful weed killer without harming the crops. These seeds have already been cleared in Canada, but they are not yet for sale. However, scientists and environmentalists worry that the seeds and 2,4-D could have unintended consequences. In fact, some have dubbed the seeds “Agent Orange Corn” in an attempt to stigmatize 2,4-D and the seeds resistant to it.
The chemical 2,4-D was, in fact, one of the main ingredients in Agent Orange. Undoubtedy, seeds that are genetically modified to resist 2,4-D will increase its use by farmers. But is it something that is potentially dangerous to our health or the environment? The answer, according to a recent Forbes.com article, is ‘no.’ While 2,4-D was an ingredient of Agent Orange, it wasn’t what made the chemical so dangerous. The culprit was a second herbicide ingredient known as 2,4,5-T. According to the Forbes.com article:
The Environmental Protection Agency has evaluated 2,4-D numerous times under increasingly stringent risk assessment evaluations and consistently found the comparatively mild herbicide safe. The Oregon State University and EPA-backed National Pesticide Information Center thoroughly reviewed the chemical and found it safe its proposed uses.
Environmentalists are also concerned that over herbicides can lead to the development of “superweeds,” which in turn will require more use of herbicides. Indeed, herbicide resistance is already a problem for farmers using glyphosate (commonly known as Roundup). However, proponents of 2,4-D claim that the product can actually decrease herbicide resistance since it will give framers another option to rotate when spraying for weeds.
While there might be more research needed to evaluate these new genetically modified seeds and the use of 2,4-D, it certainly sounds like the “Agent Orange” tag is nothing more than rhetoric.
In an ideal world, products liability and other consumer protection lawsuits should make products safer in the long run. However, there are often instances where they actually encourage companies not to innovate and improve safety. For instance, the sports equipment companies who want to design safer products (e.g., helmets) must sink a lot of money into research and design of safer products. Yet, at the end of the day, a new and improved product won’t look much different from the old ones competitors will sell at a cheaper price.
The solution is, of course, advertising the benefits of the new and improved product. Or is it?
Advertising safer products presents a Catch-22 for companies. If they don’t advertise, consumers are less likely to buy the new and improved product. This may reduce the incentive to invest in developing safer products. Yet, if they do advertise their product as “safer,” they’ll almost certainly be sued over that advertising down the line if someone is injured while using their new product.
Such is life for Riddell, Inc., one of the world’s leading manufacturers of football helmets. For years, it has faced a barrage of concussion lawsuits. In the last decade, it has attempted to improve the safety of its helmets by designing new and ostensibly safer models, one of which was called the “Revolution” helmet. Unsurprisingly, it is now being sued over its marketing of that helmet.
Earlier in December, the case of Thiel vs. Riddell, Inc., et. al., 1:13-cv-07585, was filed in federal court in New Jersey. According to the lawsuit:
[Riddell] in a engaged a scheme to mislead New Jersey consumers about the benefits of their premium-priced helmet by falsely advertising to New Jersey consumers that the Revolution helmet is manufactured with “concussion reduction technology” which reduces the incidence of concussion, and does so by up to 31%
The suit contends that marketing of the Revolution helmet was intended to and did create the perception among purchasers that the helmet better reduced the chance of concussion than lower priced helmets. Plaintiff further contends that Riddell relied upon a study by the University of Pittsburgh Medical Center to make the claim of a 31% reduction in concussions but that such study was fatally flawed and Riddell was aware of this fact. We don’t have enough facts to make any sort of assessment as to the merits of the case, but it does reenforce the dangers in marketing innovative safety equipment. Notably, the marketing video for Riddell’s new top of the line helmet, the “360″, focuses more on the features of the helmet without being very specific about its benefits. Of course, we can still see a Plaintiff claiming that it creates the perception that the helmet reduces chances of concussions. Then again, isn’t that the point?
We’ve previously written about the alleged dangers of portable gas cans and the 5 cent part that could make them safer. Last week NBC’s Today Show ran an interesting segment showing some of the scientific testing that has been done with regards to the potential for explosion. According to the segment, there have been 11 reported deaths and 1,200 emergency room visits involving gas can explosions during the pouring of gasoline since 1998. The danger allegedly stems from what is known as “flashback.” Tests conducted at Worcester Polytechnic Institute’s labs show that under certain limited conditions a flashback explosion can occur inside a plastic gas can, when gas vapor escaping the can contacts a source of ignition such as a flame or a spark. From the testing, it appears that this only happens when there is a small amount fuel left in the can and it is tilted a severe angle.
The solution that has been proposed by a number of experts and plaintiff’s attorneys is a what is known as a “flame arrester.” It is basically a metal mesh plug that keeps a flame ignited outside of the can from traveling into the can and causing an explosion. The “gas can industry” is supposedly still looking into whether flame arresters are necessary or effective. All gas cans currently have general safety warnings printed on them telling users to keep away from flames and electric motors.
The Consumer Products Safety Commission’s official position since 2009 has been that is that it is investigating whether flame arrester should be mandatory. However, a spokesperson from the CPSC recently told USA Today that they would like to see standards commission incorporate flame arrestor technology in consumer gas cans.